Employee Wages & Tips

Business owners form legal entities such as corporations and limited liability companies in order to protect themselves from personal liability. Before you choose which type of business entity is best for you and your company, consider the different types of protections offered by each of the business forms.

Corporations

New York does not allow corporate shareholders to be completely shielded from liability for their corporate debts. New York is the only state in the country that holds a corporation’s top ten shareholders personally liable for the unpaid wages of the corporation. Section 630(a) of the New York Business Corporation Law states, in relevant part:

“The ten largest shareholders …shall jointly and severally be personally liable for all debts, wages, or salaries due and owing to any of its laborers, servants or employees other than contractors, for services performed by them for such corporation.”

On January 22, 2013, Governor Cuomo released his proposed 2013-14 state budget, which contained several items that could drastically affect the restaurant industry. These proposals include:

• Increasing the minimum wage to $8.75/hour, effective July 1, 2013
• Increasing the hourly wage paid to tipped foodservice workers to $6.03/hour, effective July 1, 2013

The New York State Restaurant Association (NYSRA) is predicting that the above changes would impact 705,000 workers, costing business owners $1.01 billion a year in total wages. In addition to raising the pay rate of all employees, new notices of their pay rates will need to be provided. The New York State Restaurant Association is currently scheduling meetings with the administration and legislative leaders to provide feedback regarding these issues. If you are concerned about the impact this change will have on your business, you can share your story by contacting the NYSRA or your state senator.

The Wage Theft Prevention Act, requires all employers provide notice to their employees: (a) when they are hired, (b) annually, between January 1st and February 1st, and (c) whenever an employee’s pay rage changes. Additionally, employers in the hospitality industry must also give a new notice every time a wage rate changes.

Do not forget to provide your employees with this notice this next month. If you do not have a notice, our office is happy to help.

Employees are becoming much more aware of their rights as evidenced by the fact that they are rushing to Courts in droves to claim foul against their employers for failing to pay them an appropriate wage or for 'stealing' their tips. Recently, employees of Centolire voiced complaints that they had not been paid for the final three weeks of business before it closed and filed for bankruptcy protection. Although no suit has been officially filed, one seems imminent. Likewise, some former employees at Bar Veloce are suing for unpaid wages and labor violations and recently took to the streets to voice their frustrations by posting fliers in the neighborhood urging patrons to boycott the establishment. Whether this is the right route to take or not, the owner has taken notice and filed a defamation suit for unlawful retaliation against the employees. Another owner, Philippe Chow, is being sued by over 50 employees for failing to pay minimum wage and overtime pay to his employees.

In the field level seating section of Yankee Stadium, spectators are given menus that read:  “A 20% service charge will be added to the listed prices…”  That statement has become the subject of a class action lawsuit filed in Federal Court on May 9, 2011 which alleges that the catering companies that service Yankee Stadium misappropriated employee tips.  The lawsuit contends that the catering companies kept the twenty percent ‘service charge’ on top of the cost for the food and drink.  According to the employees, the ‘service charge’ was actually a gratuity that was owed to the employees.  In support of their claim, employees cited the recent 2008 New York Court of Appeal’s decision in Samiento v. World Yacht Inc., 10 N.Y.3d 70 (2008), which held that charges that are not voluntary payments made by the consumer, may be a “charge purported to be a gratuity within the meaning of the New York Labor Law statute.”  Even the Yankees Can’t Avoid Employee Wage Lawsuits.